Capstone Energy Plus, Inc.

(Unaudited)

1. Business and Organization

Capstone Energy+, Inc. (the “Company”), formerly known as Capstone Green Energy Holdings, Inc., the public successor to Capstone Green Energy Corporation, together with its consolidated operating subsidiary Capstone Energy+, LLC (the “Operating Subsidiary”) is a provider of behind-the-meter clean microturbine energy solutions for industrial and commercial operations, with solutions designed for the next generation of artificial intelligence (“AI”) and data center applications. The Company addresses the “Energy Trilemma” facing today’s commercial, industrial, and utility customers: the simultaneous need for resiliency, affordability, and sustainability.

Effective April 30, 2026, the Company changed its name from Capstone Green Energy Holdings, Inc. to Capstone Energy+, Inc.

The Company’s offerings include stationary distributed power generation and energy distribution solutions, including cogeneration systems such as combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), as well as solutions for renewable energy, natural resources, and critical power supply applications. The Company’s inverter-based technologies enable operation in parallel with the electric grid or in island mode within localized microgrids and serve as the stabilizing backbone for microgrid installations integrating renewables, battery energy storage, and other distributed energy resources.

The Company’s energy conversion products business line is driven by its industry-leading, highly efficient, low-emission and resilient microturbine energy systems, which offer scalable configurations and customer-tailored solutions ranging from 65 kilowatts to expansive multi-megawatt deployments. The Company is also actively developing energy solutions purpose-built for AI and data center applications, including an 800-volt direct-current (“VDC”) microturbine solution designed to interface directly with next-generation AI chip architectures, and its Energy Surplus Program (“ESP”), an integrated architecture purpose-built for the high-density, mission-critical power demands of modern AI workloads.

Through its EaaS (as defined herein) business line, the Company provides Build, Own, Operate and Maintain (“BOOM”) and energy rental solutions, as well as power purchase agreements (“PPA”) and lease-to-own structures, utilizing its microturbine energy systems. The Company also offers long-term maintenance agreements (“LTMAs”) covering planned and unplanned maintenance to protect customers’ total cost of ownership and ensure maximum system availability, with access to Original Equipment Manufacturer (“OEM”) parts.

On July 8, 2026, the Company's common stock commenced trading on the Nasdaq Global Market (“Nasdaq”) under the symbol “CEPL,” following a period during which the Company's common stock traded on the OTCQX Best Market under the symbol “CGEH.”

All references in these footnotes to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Energy+, Inc. and its consolidated subsidiaries.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). They do not include all of the information and footnotes required by GAAP for complete financial statements. The Condensed Consolidated Balance Sheet as of March 31, 2026, was derived from audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim Condensed Consolidated Financial Statements include all adjustments (including normal recurring adjustments) necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. Results of operations for any interim period are not necessarily indicative of results for any other interim period or for the full year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026, filed with the SEC on June 25, 2026.

This Quarterly Report on Form 10-Q (this “Form 10-Q”) refers to the Company’s fiscal years ending March 31 as its “Fiscal” years.

Basis for Consolidation The Condensed Consolidated Financial Statements included in this filing include the accounts of the Company, the Operating Subsidiary, Capstone Turbine Financial Services, LLC, its wholly owned subsidiary formed in October 2015, and Cal Microturbine LLC (“Cal Microturbine”) after elimination of inter-company transactions.

Reclassification Certain prior-period amounts have been reclassified to conform to the current period presentation. These reclassifications include the presentation of lease receivables, current within prepaid expenses and other current assets, lease receivables, non-current within other assets, and accrued salaries and wages within accrued expenses. The reclassifications had no effect on the Company's financial statements.

Significant Accounting Policies Except as described below, there have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for Fiscal Year 2026 filed with the SEC, that have had a material impact on the Company's Condensed Consolidated Financial Statements.

Impact of Recently Issued Accounting Standards

Adopted

In July 2025, the FASB issued ASU No. 2025-05, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” The amendments provide an optional practical expedient for estimating expected credit losses on current accounts receivable and contract assets arising from revenue transactions. Effective April 1, 2026, the Company adopted this guidance. The adoption did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

In April 2026, the FASB issued ASU No. 2026-01, “Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock”. The guidance requires an entity to initially measure paid-in-kind (“PIK”) dividends on equity-classified preferred stock based on the dividend rate stated in the underlying preferred stock agreement. The Company adopted ASU 2026-01 effective April 1, 2026. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.

Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses,” as subsequently clarified by ASU No. 2025-01. The amendments require disaggregated disclosure of certain income statement expense line items. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements and related disclosures.

In 2025, the FASB issued ASU No. 2025-12, “Codification Improvements.” The amendments include clarifications related to diluted earnings per share when a loss from continuing operations exists, disclosure requirements for lease receivables arising from sales-type or direct financing leases, and permissible methods for accounting for treasury stock retirements. The guidance is effective for fiscal years beginning after December 15, 2026. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements and related disclosures.

3. Revenue Recognition

The Company derives its revenues primarily from the sale of microturbine products, accessories, parts, equipment rentals, and services.

Revenue is recognized in accordance with the following five-step model under ASC 606:

Products and Accessories

Products and Accessories revenue consists primarily of sales of microturbine products and accessories, with revenue recognized when control of the underlying product transfers to the customer in accordance with the terms of the contract.

Microturbine Products The Company recognizes revenue when the performance obligation identified under the terms of the contract with its customer is satisfied, which generally occurs, for microturbine products, upon the transfer of control in accordance with the contractual terms and conditions of the sale. The majority of the Company’s revenue associated with a microturbine product is recognized at a point in time when the microturbine product is shipped to the customer. On occasion, the Company enters into bill-and-hold arrangements. Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met: (i) the reason for the bill-and-hold arrangement is substantive; (ii) the product is segregated from the Company’s other inventory items held for sale; (iii) the product is ready for shipment to the customer; and (iv) the Company does not have the ability to use the product or direct it to another customer.

Advanced payments in the form of customer deposits are received on these contracts, typically providing for a substantial portion of the contract value to be paid prior to shipment. Advance payments are not considered a significant financing component as they are typically received less than one year before the related performance obligations are satisfied. Payment terms in contracts with customers typically are 0 to 60 days. The Company extends payment terms past 60 days only on a limited basis, and thus any financing component is not considered material.

Accessories* *Revenue from accessories is recognized at the point in time when control transfers to the customer, generally upon shipment.

Parts and Services

Parts and Services revenue consists primarily of sales of replacement parts and revenues generated from maintenance and service programs, including Long-Term Maintenance Agreements ("LTMAs"), legacy Factory Protection Plan ("FPP") arrangements, warranty-related activities, and other service cost reimbursement programs.

Parts Revenue from parts is recognized at the point in time when control transfers to the customer, generally upon shipment.

Warranty Services The Company provides standard (assurance) warranties which do not represent separate performance obligations and are reflected as product liability. Shipping and handling costs billed to customers are included in revenue; costs associated with outbound freight after control transfers are recorded as fulfillment costs in cost of goods sold. Sales and usage-based taxes are excluded from revenue.

Factory Protection Plan (“FPP”), Long Term Maintenance Agreements (“LTMA”) and Service Cost Reimbursement The Company is transitioning from its Factory Protection Plan to Long-Term Maintenance Agreements. Both programs are designed to minimize product downtime and provide predictable maintenance costs. Revenue related to the obligation to provide replacement parts is recognized over the term of the contract aligned to monthly service periods. LTMA contracts typically range from three totwelve years and are cancellable at any time. Related costs are accrued when a customer submits a qualifying claim, based on the Company's best estimate of the probable obligation.

LTMA contracts cover critical components including engine, electronic, and fuel components, and include an annual escalator. Freight is excluded by default but may be added when requested while labor reimbursement is excluded. Advance payments received at contract inception are classified as deferred revenue and recognized on a straight-line basis over the contract term. These payments are typically made annually or semi-annually, except where an alternate schedule is requested, and are not considered a significant financing component.

Remaining FPP contracts may include labor reimbursements for work performed by Authorized Service Providers ("ASPs"). These reimbursements are accounted for under ASC 460 and recognized as contra revenue under ASC 606. The labor reimbursement is treated as a distinct performance obligation, with a portion of the transaction price allocated based on relative standalone selling price ("SSP"). A liability is recognized at contract inception for the labor component, with income recognized on a straight-line basis and reimbursement costs expensed as incurred.

Distribution Services The Company provides distribution support services to customers and distributors, including customer lead generation, brand awareness initiatives, and tailored marketing programs. Revenue is recognized over the period in which the services are performed.

Rentals

Rentals The Company accounts for customer leases under lessor accounting guidance in ASC 842, utilizing a portfolio approach for similar assets leased to a single customer. Leases are classified as either sales-type or operating leases based on whether one of the five ASC 842 classification criteria are met.

For sales-type leases, the Company recognizes at commencement a lease receivable (equal to the present value of lease payments) and a residual asset, with revenue recognized in the amount of the lease receivable as part of Product and Accessories revenue, and cost of sales equal to the carrying value of the underlying asset less the unguaranteed residual asset. Subsequent to commencement, interest income is recognized using the effective interest method.

For operating leases, the underlying asset is recorded as a rental lease asset and depreciated on a straight-line basis to its estimated residual value. Lease payments are recognized as Rental Revenue on a straight-line basis over the lease term.

Contracts with Multiple Performance Obligations

Contracts with customers often include promises to transfer multiple products, parts, accessories, and services. The Company evaluates whether each promised good or service is distinct and should be accounted for as a separate performance obligation, which may require significant judgment. Products, parts, and accessories are generally sold separately and are therefore considered distinct. Service contracts, including FPP and LTMA agreements, are evaluated based on availability from other vendors, the nature of the services, timing relative to product delivery, and contractual dependencies. To date, the Company has concluded that all service contracts within multiple-element arrangements are distinct.

The transaction price is allocated to each performance obligation based on relative SSP, which the Company determines by considering overall pricing objectives, market conditions, discounting practices, transaction size, customer demographics, geographic factors, price lists, and historical contract data. SSP is established using observable prices where available; otherwise, a range is used based on market conditions and other observable inputs. The Company typically maintains more than one SSP for individual products and services due to stratification by customer size and geography.

The following table presents disaggregated revenue by business group (in thousands):

The following table presents disaggregated revenue by geography based on the primary operating location of the Company’s customers (in thousands):

Contract Balances

The Company’s deferred revenues consist of deposits and advance payments for microturbine products, parts, accessories and parts ordered under sales contracts, which have not yet been delivered (contract liabilities), as well as advance payments on service obligations, FPP contracts and extended warranties. Deposits are primarily non-refundable cash payments from distributors for future orders. The current portion of deferred revenue and the non-current portion of deferred revenue are included in Current Liabilities and Long-Term Liabilities, respectively, in the Condensed Consolidated Balance Sheets.

Changes in deferred revenue consisted of the following (in thousands):

FPP and LTMA Contract Liabilities

Deferred revenue attributed to FPP and LTMA contracts represents the unearned portion of advance payments received under those agreements. Payments are generally received quarterly in advance, with revenue recognized on a straight-line basis over the applicable contract period. As of June 30, 2026, approximately $6.0 million of revenue is expected to be recognized from the remaining FPP and LTMA contract liabilities. The Company expects to recognize approximately $5.4 million of these remaining performance obligations over the next 12 months, with the remaining balance of $0.6 million to be recognized thereafter.

Distributor Support System (“DSS”) Program

The Company's DSS program provides support for business development activities, including customer lead generation, brand awareness, and tailored marketing services across the Company's major geographic and vertical markets.

DSS program fees are generally invoiced and paid quarterly, with revenue recognized on a straight-line basis over the applicable service period, which is typically one year. As of June 30, 2026, approximately $1.4 million is expected to be recognized from remaining DSS contract liabilities. The Company expects to recognize all of the remaining performance obligations within the next 12 months.

Unsatisfied Performance Obligations

The Company has elected the practical expedient to disclose unsatisfied performance obligations only for contracts with an original expected duration greater than one year. The majority of product sales have lead times of less than one year and are therefore excluded. Service contracts, while often exceeding one year in duration, are cancellable without significant penalty; accordingly, their enforceable duration is consideredone year or less, and they are also excluded from this disclosure.

Practical Expedients

For contracts with a duration ofone year or less, the Company expenses incremental costs to obtain a contract as incurred. Such costs are recorded within sales and marketing expenses in Condensed Consolidated Statements of Operations.

Warranty

The Company accrues estimated warranty costs at the time revenue is recognized. Warranty terms vary by product and geography and generally extend up to 24 months from the delivery date. Key factors in the warranty estimate include product failure rates, anticipated operating hours, and estimated repair or replacement costs. These estimates are updated each period as new information becomes available. The Company may also accrue costs for reliability repairs on out-of-warranty products when, in management's judgment, a specific remediation plan makes such accrual prudent. Warranty liabilities are assessed quarterly and adjusted as necessary, including when product improvements alter historical failure rates.

Research and Development (“R&D”)

The Company accounts for grant distributions and development funding as offsets to R&D expenses and both are recorded as the related costs are incurred in the Company’s statement of operations. There wereno offsets to R&D during Fiscal 2027 and 2026.

4. Customer Concentrations and Accounts Receivable

Accounts receivable are presented on the Condensed Consolidated Balance Sheets, net of estimated credit losses. The Company applies the aging method by pooling receivables based on levels of delinquency and applying historical loss rates on what has been historically uncollectible by aging categories. The historical loss rate is adjusted for current conditions and reasonable and supportable forecasts of future losses, as necessary. Additionally, the allowance for credit loss calculation includes subjective adjustments for qualitative risk factors that could likely cause estimated credit losses to differ from historical experience. The factors include assessments of various economic conditions, significant events that have or will occur, geographic location, size, and credit ratings of the customers. The Company may also record a specific reserve for individual accounts when the Company becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position. Accounts deemed uncollectible are written off against the allowance for credit loss.

Changes in the current expected credit losses (“CECL”) allowance for accounts receivable are as follows (in thousands):

Revenue Concentrations

The Company’s revenue is concentrated among a limited number of distributors. For the three months ended June 30, 2026, sales to Horizon Power Systems and E-Finity Distributed Generation (“E-Finity”) accounted for approximately 41% and 12% of total revenue, respectively.

For the three months ended June 30, 2025, sales to Cal Microturbine and Lone Star accounted for approximately 47% and 10% of total revenue, respectively.

Accounts Receivable Concentrations

As of June 30, 2026, RSP Systems and E-Finity accounted for approximately 13% and 10%, respectively, of total accounts receivable. As of March 31, 2026, E-Finity, Lone Star and RSP Systems accounted for approximately 14%,14% and 10%, respectively, of total accounts receivable.

5. Inventories

Inventories are valued at the lower of cost (determined on a first-in, first-out (“FIFO”) basis) or net realizable value and consisted of the following (in thousands):

The non-current portion of inventories represents that portion of inventories in excess of amounts expected to be sold or used in the next twelve months and could include repair parts for older generation products that are still in operation but are not technologically compatible with current configurations. The Company expects to use the non-current portion of the inventories on hand as of June 30, 2026 over the periods presented in the following table (in thousands):

6. Accrued Warranty Reserve

The Company accrues the estimated costs of product warranties at the time the related revenue is recognized. Warranty terms and conditions vary by product and geography; however, the Company's standard product warranties generally commence on the delivery date and extend for up totwenty-four months.

The Company's warranty obligation is influenced by several key estimates, including product failure rates, anticipated hours of product operation, and the expected costs of repair or replacement necessary to correct product failures. These estimates are reviewed and updated each reporting period as new information becomes available, including field performance data and engineering assessments. When the Company has sufficient evidence that product modifications or design changes are materially affecting historical failure rates, those changes are incorporated prospectively into the warranty liability estimate.

In addition to standard warranty obligations, the Company may accrue estimated costs for reliability repairs on products that are no longer under warranty. Such accruals are recorded when, in management's judgment, and in accordance with a specific remediation plan approved by the Company, it is prudent to provide such repairs. The adequacy of all recorded warranty liabilities is assessed quarterly, and adjustments are made as warranted by updated estimates or actual claims experience.

Changes in the accrued warranty reserve consisted of the following (in thousands):

7. Property, Plant, Equipment and Rental Assets

Property, plant, equipment and rental assets consisted of the following (in thousands):

The Company regularly assesses the useful lives of property and equipment and retires assets no longer in service. Depreciation expense for property, plant, equipment and rental assets was $0.9 million for each of the three months ended June 30, 2026 and 2025. Depreciation expense recorded to cost of sales was $0.8 million and $0.9 million for the three months ended June 30, 2026 and 2025, respectively.

8. Intangible Assets

The Company's intangible assets relate to two acquisitions completed during Fiscal 2026. In connection with the acquisition of Cal Microturbine, which was accounted for as a business combination under ASC 805, the Company recognized customer relationship intangible assets. In connection with the acquisition of CDSS (as defined herein), which was accounted for as an asset acquisition under ASC 805-50, the Company recognized trademark intangible assets. These intangible assets have finite useful lives and are being amortized on a straight-line basis over their estimated useful lives.

Intangible assets consisted of the following (in thousands):

Amortization expense related to intangible assets was $0.3 million for the three months ended June 30, 2026, andno amortization expense was recognized for the three months ended June 30, 2025, due to the absence of such assets.

Estimated future amortization expense for intangible assets as of June 30, 2026 is as follows (in thousands):

9. Fair Value Measurements

The FASB has established a framework for measuring fair value using generally accepted accounting principles. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows:

Level 1. Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2. Inputs to the valuation methodology include:

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used must maximize the use of observable inputs and minimize the use of unobservable inputs.

Basis for Valuation

The carrying amounts reported in the Condensed Consolidated Balance Sheets for cash, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments. The Company hadno assets or liabilities measured at fair value on a recurring basis as of June 30, 2026. The Redeemable non-controlling interest, which had previously been classified within Level 3 of the fair value hierarchy, was fully redeemed on March 31, 2026. Refer to Note 13 – Temporary Equity for additional information.

10. Leases

Lessor

The Company rents microturbine equipment to customers under lease agreements with terms ranging from a few months toninety-six months. The majority of our leases carry an initial term of thirty-six months and may include extension options, which are assessed at lease commencement to determine whether they are reasonably certain of exercise. Certain lease agreements provide the lessee with an option to purchase the underlying asset at the end of the lease term.

Monthly rental payments are fixed. Certain leases also include variable payment components for items such as fuel, excess labor, additional equipment, or technician labor and engineering support. Variable payments are not included in the measurement of the lease receivable and are recognized as revenue in the period earned.

Leases are classified at commencement as either sales-type leases or operating leases in accordance with ASC 842. In connection with its Energy-as-a-Service ("EaaS") business, the Company also enters into arrangements under which it rents certain microturbine equipment back from customers and subleases that equipment to end users, as further described in the Lessee section below.

Lessor – Operating Leases

At June 30, 2026, the Company’s minimum rental revenue to be received was as follows (in thousands):

Lessor – Sales-Type Leases

At June 30, 2026, the Company’s future scheduled minimum payments to be received from its sales-type lease was as follows (in thousands):

The Company recognized less than $0.1 million of interest income related to lease receivables during each of the three months ended June 30, 2026 and June 30, 2025. As of June 30, 2026, the current portion of lease receivables was included in prepaid expenses and other current assets, while the noncurrent portion was included in other assets on the consolidated balance sheets.

Lessee

The Company leases facilities and equipment under various non-cancellable operating and finance leases with expiration dates through Fiscal 2037. All leases require the Company to pay maintenance, insurance, and property taxes. Lease agreements for the Company's primary office and manufacturing facilities include rent escalation provisions over the lease term andrenewal options for successive five-year periods. Lease expense is recognized on a straight-line basis over the lease term, including any extension periods that are reasonably certain of exercise.

EaaS Sublease Arrangements

As part of its EaaS business, the Company rents used microturbine equipment from customers where that equipment would otherwise not be in use, and subleases that equipment to end users. During the three months ended June 30, 2026, the Company didnot enter into any new rental agreements under this program and didnot modify any existing agreements. The existing rental agreements provide the Company an option to extend the lease term; however, as exercise of these options is not considered reasonably certain, they are excluded from the determination of the lease term. There were no new rental agreements under this program during the three months ended June 30, 2025.

As of June 30, 2026, lease commitments totaled approximately 18 megawatts of microturbines and had an average term of 36 months and a total remaining commitment value of approximately $7.7 million.

Lease Cost

The components of lease expense were as follows (in thousands):

Supplemental Balance Sheet Information

Right-of-use assets and lease liabilities consisted of the following (in thousands):

Supplemental Cash Flow Information (in thousands):

Lease Maturity Analysis

At June 30, 2026, the Company’s minimum commitments under non-cancelable operating and finance leases were as follows (in thousands):

11. Debt

Exit Facility Agreement

On December 7, 2023, in connection with the Company's emergence from Chapter 11 bankruptcy, the Operating Subsidiary entered into a Note Purchase Agreement (the "Exit Note Purchase Agreement") for an aggregate principal amount of $28.1 million, consisting of $21.1 million of Exit Roll Up Notes and $7.0 million of Exit New Money Notes (together, the "Exit Notes"). The Exit Notes bear interest at Adjusted Term SOFR plus 7.00% per annum, a portion of which accrues as paid-in-kind ("PIK") through the third year following the December 7, 2023 closing date. The Exit Notes are secured by a lien on substantially all present and future property and assets of the Operating Subsidiary and each Guarantor, subject to customary exceptions, and are subject to customary covenants, including financial covenants requiring minimum consolidated liquidity and minimum consolidated adjusted EBITDA. The Exit Note Purchase Agreement also provides for a $10.0 million uncommitted incremental facility, which remained undrawn as of June 30, 2026.

The Exit Note Purchase Agreement was amended three times through March 29, 2026, as described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026. There were no amendments to the Exit Note Purchase Agreement during the three months ended June 30, 2026.

Financial Covenants

As of June 30, 2026, the minimum consolidated liquidity covenant required the Company and its subsidiaries to maintain minimum average consolidated liquidity of $4.0 million during any seven consecutive day period, and the minimum consolidated adjusted EBITDA covenant required minimum trailing four-quarter consolidated adjusted EBITDA of $8.0 million, tested as of the last day of the fiscal quarter. The full covenant schedules are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026. As of June 30, 2026, the Company was in compliance with all financial covenants under the Exit Note Purchase Agreement.

Outstanding Balance and Maturity

As of June 30, 2026, the outstanding Exit Notes balance was $25.3 million, consisting of Exit Roll Up Notes of $21.1 million and PIK interest of $4.3 million, net of unamortized debt issuance costs of $0.1 million. The Exit New Money Notes matured and were repaid in full on December 7, 2025. The Exit Roll Up Notes mature on December 7, 2026, and accordingly are classified as a current liability. Debt issuance costs are amortized over the term of the notes at an effective interest rate of 10.87% as of June 30, 2026.

Interest expense related to the Exit Notes during the three months ended June 30, 2026 and 2025 was $0.7 million and $0.4 million, respectively.

The scheduled maturities of the Company's long-term debt as of June 30, 2026 were as follows (in thousands):

12. Commitments and Contingencies

Purchase Commitments

As of June 30, 2026, the Company had firm commitments to purchase inventories of approximately $48.5 million through Fiscal 2029. Certain inventory delivery dates and related payments are not scheduled; therefore, amounts under these firm purchase commitments will be payable upon the receipt of the related inventory.

Lease Commitments

See Note 10 – Leases.

Related Party Transactions

In connection with the Company's emergence from Chapter 11 bankruptcy on December 7, 2023, the Company and its Operating Subsidiary were party to a series of agreements with Capstone Distributor Support Services Corporation ("CDSS"), an entity controlled by Goldman Sachs, and its affiliate (“Reorganized PrivateCo”), including a Services Agreement between the Operating Subsidiary and Reorganized PrivateCo (the "Reorganized PrivateCo Services Agreement"). On March 31, 2026, in connection with the closing of the March 2026 PIPE (see Note 15), the Company completed a series of transactions that fully unwound these arrangements, including:

For additional information regarding these related party relationships and the March 31, 2026 unwind, see Note 12 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026. There were no related party transactions during the three months ended June 30, 2026, and no related party balances were outstanding as of June 30, 2026 or March 31, 2026.

Legal Proceedings

Capstone Turbine Corporation v. Turbine International, LLC.

On February 3, 2020, Capstone Turbine Corporation filed suit against its former distributor, Turbine International, LLC (“Turbine Intl.”), in the Superior Court of California alleging breach of contract relating to the parties’ prior distributor relationship (which terminated at the end of March 2018) and Turbine Intl.’s failure to satisfy its payment obligations under certain financial agreements, namely an accounts receivable agreement and promissory note in favor of Capstone. The Company subsequently modified its complaint to include Turbine Intl. guarantors as defendants. The Company was seeking approximately$4.8 million in compensatory damages, along with injunctive relief and attorney’s fees, interest, and costs. In 2024, the Court ordered default judgments first against Turbine Intl. and then against the other defendants. The default judgment in the amount of approximately$7.3 million, which included pre-judgment interest and costs of the suit, was entered and placed on the docket in June 2025. The Company has prevailed in this proceeding. The ability of Capstone to collect on the judgment is unclear, as the defendants are overseas or without U.S.-based assets, therefore we havenot recorded a receivable as of June 30, 2026.

For information regarding recent developments occurring subsequent to June 30, 2026, see Note 20 - Subsequent Events.

13. Temporary Equity

Overview

As of June 30, 2026, the Company’s temporary equity consists of the Redeemable Series A Convertible Preferred Stock issued on March 31, 2026, in connection with the March 2026 PIPE (as defined in Note 15). The Operating Subsidiary’s Series A Redeemable Preferred Units, which had been classified as temporary equity in prior periods, were fully redeemed on March 31, 2026, as described below.

Part I — Redeemable Preferred Units (Extinguished March 31, 2026)

In connection with the Company's emergence from Chapter 11 bankruptcy on December 7, 2023, the Operating Subsidiary issued 10,449,863 Series A Redeemable Preferred Units (the "Preferred Units") to CDSS, an entity controlled by Goldman Sachs, representing a 37.5% equity interest in the Operating Subsidiary. The Preferred Units were classified as a redeemable noncontrolling interest within temporary equity, initially measured at fair value of $13.9 million and subsequently remeasured under the hypothetical liquidation at book value ("HLBV") method. On March 31, 2026, the Operating Subsidiary redeemed all outstanding Preferred Units for $83.5 million, funded with a portion of the net proceeds from the March 2026 PIPE, following which the Operating Subsidiary became a wholly owned subsidiary of the Company. The terms and redemption of the Preferred Units are described further in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026 (see also Note 12).

During the three months ended June 30, 2025, the Preferred Units were outstanding, and a portion of the Operating Subsidiary’s net income (loss) was allocated to them under the HLBV method, as reflected in net income (loss) attributable to redeemable noncontrolling interests. The Preferred Units werenot outstanding as of June 30, 2026 nor March 31, 2026.

Part II — Redeemable Series A Convertible Preferred Stock

Issuance

On March 31, 2026, in connection with the March 2026 PIPE, the Company issued 80,000 shares of Redeemable Series A Convertible Preferred Stock (the "Series A Preferred Stock") to funds managed by Monarch Alternative Capital LP ("Monarch") at an initial stated value of $1,000 per share, for an aggregate purchase price of $80.0 million. As redemption of the Series A Preferred Stock is not solely within the Company's control, it is classified as temporary equity in accordance with ASC 480. Holders of the Series A Preferred Stock vote together with common stockholders on an as-converted basis, hold separate class voting rights over certain significant corporate actions, and have the right to designate directors to the Company's board, subject to certain ownership thresholds. The Series A Preferred Stock is convertible at the holder's option into common stock and had an initial conversion price of $5.00 per share, subject to customary anti-dilution adjustments.

Dividends

The Series A Preferred Stock accrues a cumulative paid-in-kind ("PIK") dividend at an initial rate of 5.00% per annum on the original issue price, as increased by prior PIK dividends, compounding annually. The dividend rate was subject to increase by 200 basis points if the Company's common stock was not listed on a U.S. national securities exchange within 18 months of the closing date, and by additional amounts thereafter. In addition, beginning on the fourth anniversary of the March 31, 2026 closing date, the dividend rate for each quarterly measurement period increases by 200 basis points if certain minimum financial metrics are not satisfied as of the applicable measurement date, or by 100 basis points if such metrics are satisfied, in each case subject to a maximum dividend rate of 13.0% per annum. The Series A Preferred Stock also participates in any dividends or distributions paid on the common stock on an as-converted basis. See Note 20 – Subsequent Events regarding our July 8, 2026 Nasdaq listing, which renders the 18-month listing step-up inapplicable.

The following table presents the activity in the Redeemable Series A Convertible Preferred Stock since issuance (in thousands):

Conversion

The Series A Preferred Stock is initially recorded at its allocated purchase price, net of $6.0 million of issuance costs, with cumulative PIK dividends recorded as an increase to the carrying amount. As of June 30, 2026, the Series A Preferred Stock is not currently redeemable or probable of redemption and, therefore, is not subject to remeasurement to its redemption value. Following the listing of the Company's common stock on Nasdaq, the Company has the right to require conversion of all (but not less than all) outstanding Series A Preferred Stock into common stock at the then-applicable conversion price if the volume-weighted average trading price of the common stock equals or exceeds $15.00 for at least 20 out of 30 consecutive trading days, subject to certain conditions including an effective resale registration statement, minimum average daily trading volume, and a float held by non-affiliates of no less than $425 million.

Redemption

The Series A Preferred Stock is redeemable at the option of the holder upon certain breaches by the Company, subject to available funds and the restrictions of the Exit Note Purchase Agreement. Because redemption is contingent upon events not solely within the Company's control, the Series A Preferred Stock is classified as temporary equity rather than permanent equity.

Governance Rights

So long as Monarch holds at least 20% of the Company's common stock on an as-converted basis, it has the right to designate two independent directors to the Company’s Board of Directors (the “Board”). Monarch retains the right to designate one director while holding at least 10% on an as-converted basis, and board observer rights at 5% ownership. Monarch also holds broad consent rights over major corporate actions while a substantial portion of the Series A Preferred Stock remains outstanding, as well as certain participation rights in any of the Company’s future issuances.

Registration Rights

In connection with the issuance of the Series A Preferred Stock, the Company entered into a registration rights agreement pursuant to which the Company agreed to file a resale registration statement with the SEC registering the resale of the shares of common stock underlying the Series A Preferred Stock. The resale registration statement was filed with the SEC on April 28, 2026.

14. Stock Compensation

The following table summarizes stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations (in thousands):

2023 Equity Incentive Plans

The Company's stock-based compensation is provided under the Capstone Energy+, Inc. 2023 Equity Incentive Plan, as amended (the "2023 Plan"), the terms of which are described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026. On April 21, 2026, the Board of Directors approved Amendment No. 2 to the 2023 Plan, increasing the maximum number of shares authorized for issuance from 4,000,000 to 7,000,000 shares. As of June 30, 2026, a maximum of 7,000,000 shares were authorized for issuance under the 2023 Plan, of which approximately 4,747,044 shares remained available for future grant.

Non-Voting Common Stock

In connection with the Company's emergence from bankruptcy, a class of non-voting common stock was issued to certain key employees and directors as an incentive following the restructuring. The non-voting common stock is fully vested and ranks equally with the common stock in all respects, including as to dividends and distributions and upon liquidation, and each share automatically converts intoone share of common stock upon transfer, subject to certain restrictions. In March 2026,175,355 shares of non-voting common stock held by certain former directors and officers were converted into shares ofcommon stock. As of June 30, 2026 and March 31, 2026,333,120 shares of non-voting common stock were outstanding. Additional terms of the non-voting common stock are described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026.

Restricted Stock Awards

During the three months ended June 30, 2026, the Company began granting restricted stock awards ("RSAs") under the 2023 Plan. RSAs are shares of common stock that are issued and outstanding upon grant but remain subject to forfeiture until vesting, and generally vest over 3 years. The grant-date fair value of RSAs is determined based on the closing price of the Company's common stock on the date of grant and is recognized as compensation expense on a straight-line basis over the requisite service period. The 2023 Plan also authorizes the grant of restricted stock units ("RSUs") and performance-based restricted stock units ("PRSUs").

The following table summarizes RSA activity for the three months ended June 30, 2026:

Restricted Stock Units and Performance Restricted Stock Units

The following table summarizes RSU activity:

The beginning non-vested RSU balance includes a 25,000 RSU adjustment related to an immaterial prior-period reporting discrepancy. The previously reported March 31, 2026 balance was understated due to a system-generated forfeiture classification that was subsequently determined to be incorrect. The Company concluded the matter was not material to previously issued financial statements.

The following table summarizes PRSU activity:

15. Common Stock Issuance and Private Investment in Public Equity ("PIPE") Financing Transaction

During the fiscal year ended March 31, 2026, the Company completed two PIPE financing transactions, each of which is described in the Company's Annual Report on Form 10-K for that fiscal year. No new PIPE financing transactions were entered into during the three months ended June 30, 2026. A summary of each transaction and related instruments outstanding as of June 30, 2026 follows.

November 2025 PIPE Financing Transaction

On November 24, 2025, the Company entered into a Securities Purchase Agreement with certain accredited investors (the "November 2025 PIPE") pursuant to which it issued and sold (i)3,980,000 shares of common stock at $2.00 per share and (ii) pre-funded warrants to purchase 3,520,000 shares of common stock, with an exercise price of $0.001 per share. The transaction closed on November 25, 2025, generating gross proceeds of approximately $15.0 million before offering costs. Net proceeds were used in part to repay the Exit New Money Notes maturing December 7, 2025 (see Note 11 – Debt), with the remainder used for working capital and general corporate purposes.

March 2026 Common Stock Issuance and PIPE Financing Transaction

In connection with the issuance of the Series A Preferred Stock on March 31, 2026 (see Note 13 – Temporary Equity), the Company issued 3,333,334 shares of common stock to Monarch at a purchase price of $4.50 per share for aggregate gross proceeds of $15.0 million.

On March 31, 2026, the Company also issued 3,588,889 shares of common stock at $4.50 per share, as well as pre-funded warrants at a price of $4.499 to purchase up to 300,000 shares of common stock, for aggregate gross proceeds of approximately $17.5 million (the "March 2026 PIPE"). The shares were offered in a private placement under the Securities Act of 1933, as amended. Total offering costs of approximately $8.5 million, consisting primarily of a placement agent cash fee of 5.5% of gross proceeds and reimbursement of expenses, were allocated among the Series A Preferred Stock, common stock, and pre-funded warrants on a relative fair value basis (approximately $6.0 million, $2.4 million, and $0.1 million, respectively). Offering costs allocated to the Series A Preferred Stock were recorded as a direct reduction of its carrying amount within temporary equity; those allocated to the common stock and pre-funded warrants were recorded as a reduction of additional paid-in capital. A portion of the net proceeds, together with the proceeds from the Series A Preferred Stock issuance, was used to fund the $83.5 million redemption of the Operating Subsidiary's Preferred Units (see Note 13 – Temporary Equity and Note 12 – Commitments and Contingencies), with the remainder used for working capital and growth initiatives.

Pre-Funded Warrants

The pre-funded warrants issued in both PIPE financings have substantially similar terms. Each warrant is exercisable at any time following issuance until exercised in full, subject to beneficial ownership limitations restricting exercise if the holder would beneficially own more than 4.99% of the Company's outstanding common stock (or, at the holder's election upon 61 days' prior notice, up to 9.99%). The warrants are exercisable into a fixed number of shares at a fixed exercise price and contain no cash settlement features outside the Company's control. Accordingly, both series of pre-funded warrants are classified as equity in accordance with ASC 480 and ASC 815, with proceeds allocated to additional paid-in capital.

On May 8, 2026, an investor exercised 1,719,840 pre-funded warrants issued in the November 2025 PIPE on a cashless basis. During the three months ended June 30, 2026, holders also exercised 299,972 pre-funded warrants issued in the March 2026 PIPE financing. As of June 30, 2026,1,800,188 pre-funded warrants remained outstanding, consisting of 1,800,160 warrants from the November 2025 PIPE financing and 28 warrants from the March 2026 PIPE financing.

The following table summarizes pre-funded warrant activity for the three months ended June 30, 2026:

Registration Rights

In connection with each transaction, the Company entered into a Registration Rights Agreement requiring it to file a resale registration statement covering the shares issued and the shares underlying the pre-funded warrants. Neither agreement imposes cash penalties for failure to meet filing or effectiveness deadlines; accordingly, no liability has been recorded in connection with these obligations. The registration statement related to the November 2025 PIPE was filed with the SEC on December 23, 2025. The registration statement related to the March 2026 PIPE was filed with the SEC on April 28, 2026.

16. Employee Benefit Plans

The Company maintains a defined contribution 401(k) profit-sharing plan (the "Plan") in which all employees are eligible to participate. Employees may contribute up to the lesser of 90% of their eligible compensation or the applicable Internal Revenue Service annual contribution limits. Employee contributions are fully vested at all times.

The Plan provides for both Company matching contributions and discretionary contributions, with discretionary contributions determined by the Board. The Company makes matching contributions at a rate of 50% of each employee's contributions, up to 6% of eligible compensation, a matching formula that has been in place since February 2019. Company matching contributions vest at a rate of 25% per year over four years, measured from each employee's hire date.

The Company recorded matching contribution expense of approximately $0.1 million for each of the three months ended June 30, 2026 and 2025.

17. Net Income (Loss) Per Common Share

The Company has common stock and non-voting common stock outstanding. As both classes carry identical economic rights, earnings per share is presented on a combined basis. Basic income (loss) per share is computed using the weighted average number of combined common and non-voting common shares and pre-funded warrants outstanding during the period.

Diluted income (loss) per share includes potentially dilutive instruments, including restricted stock units, restricted stock awards, and shares issuable upon conversion of the Series A Convertible Preferred Stock, when their inclusion would be dilutive. For periods in which the Company reports a net loss available to common stockholders, all potentially dilutive instruments are excluded from the diluted share count as their inclusion would reduce the loss per share.

For the three months ended June 30, 2025, the accretion of the Operating Subsidiary's Preferred Units to their maximum redemption value is reflected as a reduction in net income (or increase in net loss) available to common and non-voting common stockholders in the computation of basic and diluted earnings per share, consistent with the two-class method requirements under ASC 260. The Preferred Units were fully redeemed on March 31, 2026 and, accordingly, no such accretion is reflected for the three months ended June 30, 2026. For the three months ended June 30, 2026, net income (loss) available to common and non-voting common stockholders reflects a reduction for cumulative paid-in-kind dividends accrued on the Series A Convertible Preferred Stock. Refer to Note 13 – Temporary Equity for additional information regarding the Preferred Units and the Series A Convertible Preferred Stock.

The following table presents the computation of basic and diluted net income (loss) per share for the three months ended June 30, 2026 and 2025 (in thousands, except per share amounts):

The following table summarizes the potentially dilutive securities excluded from the diluted share calculation for each period presented:

18. Segment Information

Segment Structure

The Company operates as a single reportable segment encompassing the development, manufacture, sale, and rental of microturbine energy systems and their related parts and services. This determination is consistent with how the Company's Chief Executive Officer (the "CODM") evaluates performance and allocates resources on a consolidated basis.

The CODM assesses segment performance using consolidated net income (loss) on a GAAP basis, consistent with the basis of presentation in these financial statements. This measure is compared against prior periods and forecasted results to support operational decision-making, cost management, and business expansion initiatives. The CODM does not evaluate the segment using asset or liability information, and there are no intersegment sales or transfers within the consolidated entity.

Segment Profit or Loss and Reconciliation to Consolidated Statements of Operations

The following table presents reported segment revenue, gross profit, significant segment expenses regularly provided to the CODM, and a reconciliation to consolidated net income (loss) (in thousands):

19. Supplemental Balance Sheet Information

Prepaid Expenses and Other Assets

As of June 30, 2026, the Company had $2.0 million of royalty-related assets remaining recorded within the “Prepaid expenses and other current assets” and “Other assets” line items on the accompanying Condensed Consolidated Balance Sheets. The assets are being amortized over a 15-year period through September 2033 using an effective royalty rate.

A 15-year amortization period is the minimum expected life cycle of the current generation of products. The effective royalty rate is calculated as the prepaid royalty settlement divided by total projected microturbine system units over the 15-year amortization period. On a quarterly basis, the Company performs a re-forecast of microturbine system unit shipments to determine if an adjustment to the effective royalty rate is necessary and accordingly whether an impairment exists. The Company determined an impairment didnot exist as of June 30, 2026, or March 31, 2026.

The current and long-term portions of prepaid royalties and prepaid and other assets were as follows (in thousands):

Accrued Expenses

Accrued Expenses consisted of the following (in thousands):

20. Subsequent Events

Nasdaq Listing. On July 8, 2026, the Company's common stock commenced trading on the Nasdaq Stock Market LLC under the symbol “CEPL.” Prior to the listing, the Company's common stock was quoted on OTCQX Best Market under the symbol “CGEH.” The listing did not involve the issuance of any new shares of common stock or the receipt of any proceeds by the Company.

Impact on Series A Preferred Stock. As a result of the listing of the Company's common stock on a U.S. national securities exchange (see Note 13 – Temporary Equity), the provision of the Series A Preferred Stock that would have increased the PIK dividend rate by 200 basis points per annum in the event the common stock was not listed on a U.S. national securities exchange within 18 months of the March 31, 2026 closing date is no longer applicable. In addition, the listing satisfies one of the conditions to the Company's right to require mandatory conversion of the Series A Preferred Stock into common stock, which remains subject to the additional trading-price, registration, trading-volume, and public-float conditions described in Note 13.

Shelf Registration Statement. On July 7, 2026, the Company filed a shelf registration statement on Form S-3 with the SEC which was declared effective on August 6, 2026 and permits permit the Company to offer and sell, from time to time, up to $500.0 million of common stock, preferred stock, debt securities, warrants, and/or units. The Company filed the registration statement to provide financing flexibility for general corporate purposes; no securities have been offered or sold thereunder as of the date of this Quarterly Report on Form 10-Q.

California Air Resources Board (“CARB”) Notice of Violation In August 2026, subsequent to quarter end, CARB issued a Notice of Violation (“NOV”) alleging violations of California’s Distributed Generation Certification Regulation involving 27 distributed generation units sold or leased for use in California. The NOV states that violations may result in civil penalties on a per-day, per-violation basis but does not specify an aggregate penalty amount. The Company intends to seek resolution with CARB. Because the matter is at a preliminary stage, the Company cannot reasonably estimate any resulting loss or range of loss, and no liability has been recorded as of June 30, 2026.

The Company evaluated subsequent events through the date of issuance of these financial statements and determined that no events occurred that require recognition or disclosure, other than those described above.